Former Goldman Sachs CEO Lloyd Blankfein says a wash of free money is creating ‘bubble elements,’ citing SPAC market




Lloyd Blankfein wearing a suit and tie: Brendan McDermid/Reuters


© Brendan McDermid/Reuters
Brendan McDermid/Reuters

  • Goldman Sachs’ former CEO Lloyd Blankfein told CNBC on Thursday that a “wash of free money is clearly creating bubble elements in the markets.” 
  • The banking titan blamed low interest rates for creating free money for large investors. 
  • Blankfein also cited speculation in the growing SPAC market: “Look at SPACs and how much money  is available on the basis of somebody’s reputation as opposed to a business plan.”

Former Goldman Sachs CEO Lloyd Blankfein told CNBC on Thursday that a “wash of free money” due to low interest rates is “clearly creating bubble elements in the markets.”

Loading...

Load Error

“Given that money is kind of free, it presumably is not being allocated in a disciplined way, and so there are bubble elements to this,” Blankfein said. “Look at the credit market — people are lending to what historically would have been weak credits for very little money.”

The banking titan also referred to the SPAC market as a sign that the market is taking on much speculation lately. In this year alone, about 110 blank-check firms led by notable investors like Chamath Palihapitiya and Bill Ackman have raised over $40 billion on public markets. That’s over $26 billion more than what last year’s SPACs raised.

Read more: Citi’s US equities chief warns of an ‘extreme peak’ in earnings revisions heading into the crucial reporting season — and explains why it makes stocks vulnerable to a pullback in the weeks ahead

“Look at SPACs and how much money  is available on the basis of somebody’s reputation as opposed to a business plan,” Blankfein said. 

The banking titan can be added to the growing list of investors voicing concerns about the speculative nature in markets. Last week, venture capitalist Bill Gurley said the stock market reminded him of the dot-com bubble of the late ’90s.

Continue Reading

Source Article